France resists EU electricity and gas deregulation plans

France is resisting plans to open Europe's electricity and gas markets to more competition, undermining efforts to boost the long-term growth potential of the economy.

EU leaders want to set a timetable for giving commercial users a free choice of energy supplier, after France yesterday insisted on maintaining state-owned Electricite de France SA's stranglehold on household customers.

"It would have been better had we been able to say: `Let's liberalize it all,' but there are national interests that can't be avoided," Italian Prime Minister Silvio Berlusconi said after a first day of talks yesterday.

Failure to open up the EU's US$300 billion electricity and gas industry would be a setback to Europe's ambitions to rival the US economy. European growth lagged the US throughout the 1990s and unemployment, at 7.7 percent, is above the US rate of 5.6 percent.

Electricite de France, the global energy leader 100 percent owned by the French state, is largely protected from competition in its home market, while last year it made acquisitions in Italy, Britain, Germany, Spain and Belgium.

France's leeway to make concessions is limited by a presidential election race that pits the incumbent, Jacques Chirac, against Prime Minister Lionel Jospin. The two carried the campaign into the summit as they sought to stand up for French interests.

Both cited the "public service obligations" of a nationwide utility and vowed to defend Electricite de France's monopoly on supplying the country's 30 million households, the most profitable part of its business. The election takes place in two rounds, in April and May.

"The French have their problems with the energy market," German Finance Minister Hans Eichel said. "We will make progress, but we won't get to full liberalization now. There will certainly be no delay but step-by-step opening -- that will certainly be a result."

The proposed timetable for breaking down barriers for commercial customers -- 2003 for electricity, 2004 for gas -- remains in dispute, Spanish Economy Minister Rodrigo Rato said after yesterday's talks.

Those deadlines were too tight for Jospin. He favors maintaining Electricite de France's monopoly over commercial users for at least two years after an EU law takes effect, according to a text of his remarks to the leaders.

One possible compromise, commission President Romano Prodi said, is for the leaders to agree today to decide by the end of 2002 on a date for permitting private consumers to choose their energy supplier. French officials had no immediate comment on that proposal.

Seeking to regain the initiative, Jospin revived proposals -- shared openly by no other country yesterday -- to create a central authority in Europe that would coordinate national tax and spending policies.

Cross-border trade covered only 7 percent of European energy consumption in 2000, according to the European Commission, which points to bottlenecks at borders including between France and Spain.

Austrian Finance Minister Karl-Heinz Grasser called France's refusal to set a date for liberalization ``unacceptable.'' Grasser lumped the French leaders together with German Chancellor Gerhard Schroeder, who is trying to boost his own reelection campaign by protesting EU plans to cut government subsidies for coal and to make companies vulnerable to hostile takeover bids.